The Registrar of Companies (ROC) is an office under the Indian Ministry of Corporate Affairs that handles the Companies Act 1956 and the Companies Act 2013’s administration. The Companies Act 2013 passed by the parliament received the President of India’s assent on August 29, 2013. The Act consolidates and amends the Companies Act 1956. The Companies Act 2013 was notified in the official gazette on August 30, 2013. Some of the provisions of the Act were implemented by a notification issued on September 12, 2013. The provisions of the Companies Act 1956 are still in force.
The main regulatory authority for the company registration process in India is the Ministry of Corporate Affairs (MCA). When an individual wish to form a company, all information and legal documents must be submitted to the MCA for processing the application. Once the company is incorporated, specific documents must be filed with the Registrar of Companies. Post-incorporation formalities are also performed at the MCA.
First and foremost, here is a list of documents required for incorporating a company in India:
➤ Certified copy of the charter or founding agreement. In the case of translation of the documents into – English, translation notarization is also required;
➤ Address of the registered office or principal place of business;
➤ Directors and secretaries’ list of the new company;
➤ Residents’ details of India who are entitled to take decisions in the company (full names, addresses);
➤ Full address of the place where the company’s activities will be carried out;
➤ Company name;
➤ Main, incidental, and other objects and purposes of the company;
➤ The amount of the authorized capital and the share capital.
Secondly, to properly register your company in India, you are required to meet certain conditions:
A company can be registered in India by at least 2 persons, who must act as company directors or shareholders. The shareholders’ maximum number allowed is 200 and the company can have up to 15 directors.
One of the directors of the company must be a resident of India. A person is considered a resident if he or she stays in India for at least 182 days in the previous tax year, regardless of nationality.
Invest according to the need of your business, and there is no minimum capital requirement as such to be kept in the company. However, the government tax on the registration of the company is calculated according to the amount of capital.
The proposed name of the company must not be similar or identical to an existing “company name”. In addition, you should check with the Trademark Registry that the name you have chosen for the company is also not similar or identical to a trademark registered or applied for in India.
Here are some significant things to keep in mind when choosing the right business structure before registering a business in India:
Risk: All businesses carry some degree of risk, and business owners will want to choose a structure that protects their assets from the business’s liabilities;
Taxation: Another important aspect to consider is taxation;
Complexity: When choosing a business structure, it is essential to check the process’s complexity, the requirements list, and compliance, before selecting the right structure to register your business in India. An entrepreneur should have a clear idea of the type of legal compliance he or she is prepared to face. Although some business structures are relatively investor-friendly compared to others, investors will always prefer an accredited and legal business structure.
To start a business in India, there are the following types of business entities:
➤ Joint Stock Company: A joint-stock company or public company is a type of limited liability company that offers its shares to the public. A public company must have a minimum of fifty shareholders. Most joint-stock companies are listed on the stock exchange.
➤ Private limited company: A private limited company is a type of limited liability company, the shares of which are held by fewer than fifty people. These shares are not available to the public. Most businesses that are incorporated as private companies are limited liability companies.
➤ Limited Liability Partnership: This is a well-structured business model because the legal entity is separate from the partnership entity and the business assets are separate from the partners’ assets. If the business suffers losses, the partners’ assets are not at risk because each partner’s maximum liability is defined by his or her equity in the entity.
➤ Partnership: This business is an arrangement in which parties, called partners, agree to cooperate to promote their mutual interests. Partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments, or combinations.
➤ Sole Proprietorship: An entity run by a single individual and generally employed in traditional businesses. The founder is fully responsible for the entire business, as the business and the owner are not separate from each other.
➤ One Person Company: A company run by a single person (sole proprietor) who is also the shareholder and manager. The One Person Company is a newly introduced type of company. The One Person Company was introduced in the Companies Act 2013 to support entrepreneurs who can start a business or register a company, allowing them to create a one-person economic entity.
➤ A Section 8 company: A Section 8 company of the Companies Act 2013 is the same as the Section 25 company under the old Companies Act 1956. Section 8 company is one of the most popular forms of non-profit organizations in India. It has been authorized for expanding commerce, art, science, education, research, social welfare, religion, for the protection of the environment, if there is any form of income, then it can only be used for advertising the objects of the company and no profit can be paid to its members.
➤ Liaison Office / Representative Office: A liaison office can be established with India’s Government’s approval. The Liaison Office’s role is limited to information gathering, export, and import promotion, and facilitating technical and financial collaborations. The Liaison Office cannot undertake any commercial activity directly or indirectly.
➤ Project Office: A foreign company planning to execute specific projects in India can set up a temporary project office or site in India to carry out activities only related to that project. The Indian government has now granted general permission to foreign entities to establish project offices, subject to certain conditions.
➤Branch Office: Branch offices are involved in the following activities: goods’ export and import, professional or consultancy services’ provision, carrying out research work, in which the parent company is engaged. Technical or financial collaborations’ promotion between Indian companies and the parent company or a foreign group.
First and foremost, to properly register a company in India, it is significant to follow the following steps in the incorporation and registration process:
Structuring the entity is the business’s core, in the first step you need to decide what type of entity you need to register to get maximum tax benefits. You can register a One Person Company, a private limited company, a partnership, a limited liability company, a branch office, a liaison office, or a project office. The entity structure depends on the transaction’s nature, the industry’s nature, and the investor’s residential status.
The Director Identification Number (DIN) is an identification number for a director and must be obtained by anyone wishing to become a company director. The Director Identification Number of all proposed directors of the corporation, along with their names and addresses, must be provided in the corporation’s registration form. The DIN can be obtained by completing the SPICe+ form, which is the company’s registration form. Indeed, SPICe+ is an online company registration form, through which the DIN can be obtained for up to three directors. If the company has more directors and they do not have a DIN, the company can be incorporated with three directors and must appoint new directors later after incorporation. Appointed directors can obtain a DIN by completing Form DIR-3, as only proposed directors of an existing corporation can apply for Form DIR-3.
Because the company registration process is entirely online, digital signatures are required to file forms on the Ministry of Corporate Affairs portal. The DSC is required for all proposed principals and subscribers to the Memorandum of Association (MoA) and Articles of Association (AoA). The DSC can be obtained from government-recognized certification authorities. The DSC Category 3 must be obtained by directors and underwriters of MoAs and AoAs.
To apply for corporate registration, the SPICe+ form must be completed and submitted on the Ministry of Corporate Affairs portal. To complete the SPICe+ form and submit the documents, the corporation director must register on the Ministry of Corporate Affairs portal. Once registered, the principal can log in and access the Ministry of Corporate Affairs Portal services, including e-filing and viewing public documents. The firm must also reserve its name by submitting two proposed names in Part A of the SPICe+ form. Name reservation is essential because if the company name is similar to trademark registration, or contains words prohibited by the Companies Rules 2014, the SPICe+ form will be rejected. If the SPICe+ form is rejected due to non-approval of the company name, the applicant must re-file another SPICe+ form for reservation of a new name by paying the prescribed fee. However, once the name filed in Part A of the eIPC+ form has been approved, it will be reserved for a period of 20 days during which time the company must complete the eIPC+ form Part B and submit the form online. The applicant must provide the company and director details in the eIPC+ form Part B, attach the documents, attach the CSG, verify the form and submit it.
The next step is to draft the Articles of Association and Memorandum of Association and other relevant forms for the company registration in India. These documents are the bylaws of the company and should be carefully drafted according to the nature of the business. These documents should be prepared by professionals.
All the company registration forms must be signed by the directors and shareholders. These documents must be signed in the lawyer’s presence or advisor and must be certified by a notary, apostle, or attestation. The documents must be signed by a notary only or by an attestation depending on the investor’s country. For example, investors in the US need a notary document and an apostle, but investors in the UK need a notary only.
The next step is to file the documents with the concerned Registrar of Company. This process can be done by the company secretary or a registered chartered accountant in India, as in this process a CA/CS certification is required. In addition to the company registration, you will need to apply for tax registration with the Income Tax Department.
Once the application for registration is completed and submitted with the required documents, the Registrar of Companies reviews the application. After verifying the application, it will issue the Certificate of Incorporation. The Certificate of Incorporation is issued with the PAN and TAN as assigned by the Income Tax Department. An email containing the Certificate of Incorporation as an attachment along with the PAN and TAN will also be sent to the applicant.
Once the company is registered, you will not be able to start your business until you have an international bank account. The next step is to open a corporate bank account with an international bank so that you can access your account from anywhere in the world.
Once the bank account is opened, you will be able to get the Good and Services Tax registration using the same Digital Signature Certificate.
Here are the taxes that a company in India may be subject to:
|➤ Corporate tax is 30% for Indian companies (registered in the jurisdiction)|
|➤ 40% corporate tax for foreign companies|
|➤ 15-30% income tax on salaries of foreign specialists|
|➤ Due to the establishment tax, the amount of all taxes increase by 2%|
|➤ 1% tax on the total value of all company assets|
|➤ There are also different types of excise taxes like basic tax and establishment tax|
|➤ VAT in India varies from state to state. The tax is levied on every act of purchase/sale|
For a business to function properly, it is significant to register it. Here are some reasons why it is wise to register your company:
1. The company’s main identity is given by the company registration: To run a company, it is significant to register it. Indeed, registration gives a unique identity to the company. Once the company is legally registered, it is easily able to give confidence to the consumers. By registering legally, your business gets a legal name, address, and identity.
2. Registration protects you from personal liability: When you register a business even if it is in your name, you do not have to personally compensate for any losses in the business. As a result, any property, as well as any heavy damage, can be filed in court, but the person who owns a registered company is not held fully liable.
3. It is easy to attract customers: It is not easy for a customer to believe in a company, or a product made by it, but the members present in the company make it so attractive that it becomes very easy to attract and trust.
4. Facilitating to get investors for your business: To run a business, one needs a complete financial amount. In such a situation, no one can raise enough funds or enough resources to run a business. Therefore, the business needs investors or it takes a loan from any bank to meet its needs. Thus, it is significant to register this business. If a company is not registered, no investor will invest its amount in that company. Before inviting an investor to invest in your company, you must register your company.
5. To sustain the business: Some people start their business on a small scale, at that time they do not register their business. Therefore, no one can guess how long they will be able to run their business.
To register a company, it is necessary to have a photocopy of the identity documents of all the directors present along with their proof of address. Apart from other certificates, it is also mandatory to have a photocopy of the PAN card of all the officers at the time of company registration. If you have purchased your office, then its certificate, if not if you have taken an office on a lease, a photocopy of its certificate is also required at the time of registration. In addition, if you have taken a land lease, it is mandatory for you to have a no-objection certificate received by its owner.
For the person who wants to register the company, it is obligatory to present his identity proof as well as the certificate of his registered e-mail ID. When registering the company, it is mandatory to present a photocopy of the company owner’s bank statement and a photocopy of any other type of invoice.
It does not take much time to set up a company in India, previously it took more time to register it. Without registering a company, you cannot do business there successfully. After registration, you are ready to face the related problems in the future. A business is not run by a single person but with the cooperation of the business’s managers.